Impact of online Shopping on Shopping Malls

Various studies have significantly investigated the growth of online shopping and have always mentioned the impacts of online shopping on shopping malls to be a negative one. This study revolves around the confirmation of this hypothesis. By exploring the possible relationship between certain factors such the number of shopping and the percentage increase in the online shopping retail, this studies performs an study analysis to prove or dispute this common assertion that online shopping negatively impacts on shopping malls. The study uses Amazon online shopping company as a representation of the entire online shopping platforms in the US. The analysis is carried via multiple linear regressions on the online shopping characteristics and those of the shopping malls. This shopping platform is available to all consumers who have an access to the World Wide Web and is available 24 hours.

Through the internet, the consumers enjoy various services such as product information, competitive prices and the services are relatively good. According to report on the e-market, a large proportion which constitute about 40 % of the entire US population shops online. Online operations have been responsible for outstanding profits in some of the major companies all over the globe. Companies such as Land’s End, attribute their success to online retailing for instance this company made a profit through online operations than it never did within 38 years of catalogue operations Besides Gap, Inc. This will come a long way in introducing some of the most favorable recommendations aimed at mitigating the threats of online shopping while preserving its advantages. This study is thus important in explaining various concerns in the field of commerce such as the negative impacts of online shopping on shopping malls, the level at which shopping malls will decline in the near future due to online shopping and the employment behavior of a population characterized by online shopping.

Chapter 2: REVIEW OF LITERATURE Development of the online shopping Online shopping owes its origin to the early 1980s with its chief pioneer as Michael Aldrich who launched a system, which enabled consumers, agents, customers, distributors, suppliers and service companies to be connected online to the corporate system. Michael Aldrich started with the use of a two-way message communication service, which was referred then to as videotext. This service later came in handy to bring change to the business world. Amazon. com then followed by launching its online shopping site in 1995 as well as eBay which also launched its online commercial activities in 1995(Kulviwat, Thakur, & Guo, 2017, p. The founder of eBay was Pierre Omidyar though originally eBay was called Auctionweb. In the early 1990s improvements in the technology and growth ambitions among companies to seize this opportunities contributed to make serious efforts on employing the use of the internet to better their marketing strategies.

The business premises started making efforts in engaging in the online trade by creating highly developed websites, which enable customers to shop at the comfort of their homes. Since its commencement, various online retail have since been started, these companies such as Amazon, eBay among others have grown to have some of the outstanding sales in the US. This adjustment has been made possible because of internet growth and availability of cheap internet enabled devices such as smart phones and personal computers. Today majority of shoppers combine online shopping with real life shopping by use of access to WiFi and the showrooming trend. Consumers make their purchases in the retail stores almost at the same time they use mobile devices for online shopping.

A recent study done in the year 2015 revealed that about 74% of consumers used mobile phones to help them while doing their shopping and as a result about 79% made purchases. In the attempt to attract more customers and be in a position to retain them, the online businesses ensured that their cost saving strategy was readily able to supplant the needs of consumers to have a physical interaction with the product. It is with much interest to note that a high number of customers expressed the need to see the pictures of products sold online thereby attracting shoppers to visit a website according to the recent study. However the need to physically interact with the goods in this study may have been alleviated to a point where it is deemed not necessary especially when confronted with other satisfiers which are more significant, therefore increasing raising the chances of online businesses thriving to compete with other online storefronts as well as traditional brick-and-mortar.

Potential buyers often turn to social media platforms such as Facebook for advice, reviews, and recommendations In the US, laptops and desktops still constitute the primary medium for online shopping even though mobile e-commerce is rapidly rising. In the last quarter of 2016, mobile e-commerce spending’s were about 22. According to a study done in 2012, it was revealed that online shopping was rated as position 11 out of the 15 purposes of using the internet. This is majorly attributed to consumers’ perceived risks of online shopping which has by a large extent influenced attitudes of users towards online shopping and as a result a general effect on the online purchasing behavior. The understanding of consumers’ perceived risks, attitude, and their purchasing behavior helps provide the basis for study of consumer online behavior.

Various studies on online shopping risk perception depict a multifaceted perception such as financial risks, product risks convenience and non-delivery risks. Through the employment of a web-based survey in which 300 online shoppers of Malaysia largest online market place participated, the results indicated that the risks that were very dangerous and largely influenced the attitude of online shoppers in a negative way were product risk, financial risk and non-delivery risks. Online retailers such as Amazon have thus since engaged in various strategies aimed at improving their services in order to ensure their success. They tend to improve their interactivity to ensure memorable customers experience. Consumer goals such as experiential-oriented and goal-oriented have great impact on the online shopping behaviors (Khitoliya, 2012, p. Besides consumer characteristics, such past online experience and the innovative nature of the online shop tend to have substantial impact on the progress on online shops.

The mode and characteristics of online shopping Online shopping also known by different names such as e-store, online store, e-web-store, E- shopping or virtual store provides a platform for purchasing goods and services by use of electronic data interchange and online transaction processing. Their use is attributed to the fact that such platforms are outreaching and relatively cheap. The customers can view the product details in these platforms and making their purchases without necessarily visiting the shopping malls because some businesses deliver the goods to the consumers. According to Bosari (2012), 94% of the major companies in the US with marketing departments always include social media as a component of their promotion tools. Out of the companies included in this study, 85% have since enhanced their market publicity through the social media and 58% of the companies managed to improve their within 3 years, an achievement attributed to the use of social media (Zhong, n.

d. According to Pew Research Centre, (2018) 89 % of the US population uses internet enabled phones which can easily use in shopping various products. This trend is not limited to the US. All over the world evolution of cheaper and better smartphones have been on the rise. According to Banumathi, Parimala, Ramprasath, & Saranya, (2017) 46% of the internet users in the Asia Pacific region have purchased for goods and services via the online platforms. In Europe, the use of mobile e-commerce stood at 32% in 2016 while in North America about 30% of the entire consumers had shopped online via various digital media such as smartphones and computers (Moon, 2015, p. Customers are relieved of the stress to stand in long queues in cash counters to make payment of products purchased.

The customers can also make use of search engines in the online sites to look for products of their choice thereby saving time. Online tracking. Once customers have made their purchases, they can track the order status and the delivery status. Selection merits. com books, book’s excerpts are always availed for the targeted customers which enhance their decision making process. By availing all this information, the customers is able to make good purchase decision without necessarily performing extra product research as compared to physical stores such as shopping malls. Pricing merits. Because online stores do not pay for rent for the storefront in urban areas where rent is quite high yet they sell relatively larger quantities of good, they can easily afford to sell their products and services at relatively cheaper prices as compared to the shopping malls.

The amount of discounts offered by online retails shops can be substantial and can constitute up to 50% of the suggested retail price. Some products such as clothing poses a great challenge in online buying since the customer cannot physical inspect and try the product to find out its applicability. Besides, in some cases, there are some small details, which are not noticeable from the online shops. Online shoppers also are denied the ability of physical inspection and interaction of the goods in order to try them before purchase is made. In addition, there are risks of losing some customers since online shoppers lack the power to have price negotiations with online sellers- something that exists in local stores. Back ordered items.

This does not augur well with large products such as furniture. Besides when a customer decides to return the product, some online retails do not offer free return. Again, the buyer will have to incur additional cost on the same. Time concerns issues. Another setback of online shopping is the time span taken to deliver the product. Its primary objective was to get the customers out of the harsh weather. It ended up introducing the world into shopping complexities as the need to avoid problems such as bad weather and dirt rose to be a primary concern for the shopping centers leading to the growth of shopping malls. Following the migration of people out of the cities and immense growth of the automobile, by 1960, there were over 4500 shopping malls accounting for 14% of the total retail sale.

This growth has ever since grown until the introduction of online shopping. In 1975, there were about 16400 shopping malls in the US accounting for 33% of the total retail sales (Dávila, 2016, p. Shopping malls avails various types of stores in a single location. The types of products and services ranges from household items to electronics. The customers can thus get all the products they want under one roof. Most shopping malls contain varieties such as groceries, reading material, cinemas, and clothes among others. The buyer is thus exempted from the need to visit one store after another in search of the various products. Vastness of the place. Shopping malls are always very large and this may become a challenge especially to the senior citizens who may find it difficult and tiresome to traverse the mall in search of items of their choice for purchase.

Drain on resources. There is an incorporation of a large number of products and services in shopping malls and this most of the time is tempting to consumers. Consumers often find themselves engaging in impulse buying with the sales and special offers that shopping malls offer make it even harder for consumers to resist such impulsive buying. As well, shopping malls contribute largely to air pollution and heavy traffic on roads nearby them. They are situated mostly in the outskirts of town and that would mean people must go to the malls using their private cars mostly, which in turn increases traffic apart from increasing air pollution. Besides there are possibilities of selling similar merchandise in close proximity. This intensifies the competition between the two entities selling the similar products Besides shopping malls, have strict rules regarding the product display and signage process Relationship between success in online shopping and possible implications on the shopping malls.

Due to decreased online shopping risk perception and their impacts on consumer’s intents, the growth of online shopping has been a major threat to shopping malls. 4% in 2015. According to a Forrester Research Study, by the end of 2018, online shopping will constitute over 11% of all the purchases in the US. On the other hand, study conducted in the same year depicted decline shopping mall sales. The identified shift in purchases from the online shopping malls to the web-based platform has had serious impacts on shopping malls as previously mentioned. This has resulted into a shift in demand for the retail space especially for various shopping malls. According to CAI & Cude, (2017) out of the 1200 malls in the United States, 15% are about 30 to 50% vacant.

Since 2010, more than a dozen shopping malls have since closed down with more that 60% at the brink of closing down as well. The majority of the shopping malls and other offline retailers have since focused on their physical presence as their brand opportunity. This implies that the shopping malls are now shifting to having relatively smaller number of stores in particular areas. They will thus be concentrated in shopping areas in order match their desired brand impressions. There have been various attempts by different scholars to explain this meltdown in the shopping mall to the possible deep recession. However, this cannot be case because the American GDP had grown for the past 8 consecutive years. As at 2017, there were low gas prices in the US, unemployment rates that is under 5% making year an excellent match for the wage growth especially among the middle and low-income earners in the US.

Besides, despite the overall decline in the revenue earned form the stores, the overall retail revenue has been on the rise and Gross Domestic Product in the US has been on the rise even in the years the country faced the larges fall in the revenue earned from stores for example in the year 2017. This indicates that other than the overall economic performance of US economy, there are other factors, which can explain the current trends in decline in the shopping malls. This is however challenging for the shopping malls because of the additional expenses that incur such as rent which are not incurred by the online shopping platforms. The various affordability of online shopping malls, which have contributed to their success at the expense of the shopping malls, includes various applications, mobile wallets, growth, and development of smart phones.

Chapter 3: METHODOLOGY Evaluation of any economic dependence should encompass the growth characteristics of the factors under study. This chapter encompasses the situational impacts of online shopping on the shopping malls in the US. Amazon is picked as a representation of the entire US online market because of the reasons identified below. The constant e takes care of all the other factors, which are likely to determine the revenue earned from the stores, which are not taken care of by the two investigated variables. These variable are measure with 95% confidence level. Corrected error methodology is used in order to improve the confidence level and the robustness of the inferences. Via the Microsoft tools on regression analysis, multivariable regression is carried out in order to determine the various regression coefficients.

The above discussion suggest that if the if the null hypothesis is proved to be right then online shopping has negative impact on shopping mall otherwise online shopping do not negatively impact on shopping malls. The data on the GDP was acquired from US Bureau of Economic Analysis while Amazon is annual, net sales were obtained from Statista. com The data used to verify the hypothesis on impacts internet shopping on shopping mall total sales was sourced from Amazon total revenue between 2010 and 2017. In this research, Amazon was used as a representation of the entire online shopping. This is because Amazon owns the largest piece of the e-commerce sales in the US. According to Bosari (2012), Amazon owned about 44% of the entire US e-market.

Table 3: Statistical description of the sample data From table 2, it can be seen that the amount of revenue earned by Amazon has been exponentially increasing from the year 2000. The amount of revenue earned by stores however does not show any consistent pattern in either growth or decline. It is characterized by a rise and a fall for instance between 2015 and 2016, it realized a fall of over 10000 while between 2011 and 2012, it realized an increase of more than 1000. The Gross Domestic Product on the other hand depicts a consistent increase though the rate of its rise is less than that of the net revenue earned by Amazon within this period. Regression Analysis Based on the modelled econometric model, there is one dependent variable(revenue from the store) and two independent variables( Gross domestic product and Amazon’s net revenue).

Via the use of the adjusted R-square, a comparison is made between the illustrative power within our regression model : The value of adjusted R square (0. 9135) depicts a modified form of R-square which is adjusted for the two predictor variables for the revenue earned by stores( total revenue earned by Amazon online retail and Gross Domestic Product. ) This value is less than the R square since it takes care of the interactivity between the independent variables and their possible impact on the relationship being sought. It is thus clear that the percentage of revenue from the stores, which is being explained, by Amazon total net revenue and the Gross Domestic Product is 91. Interpretation of the coefficient. This shows that the earnings of a shopping mall are greatly influenced by the online shopping characteristics.

Based on the above result, it is clear that an increase in the revenue earned by the online shopping malls negatively impact on the total revenue earned by the shopping malls. t-Test Coefficient We then test two estimated coefficients individually via using t-tests. The hypothesized true coefficient. The estimated value for with a standard error of this estimate is set being =0. Then. And T=-1854. 29 Absolute value of t is 1854. 29 Absolute value of t larger than =2. The null hypothesis is thus rejected and the alternative accepted. 001 indicates that the null hypothesis is rejected. This confirms the relevance of the modelled equation. The above F-test confirms that the coefficients are significant The SAS System The REG Procedure Model: MODEL1 Dependent Variable: SR SR Based on all the above hypothesis tests, the coefficients are significant hence, the modelled econometric equation is given as -1899431.

032051 Where SR=Store revenues ANR= Net sales revenue of Amazon GDP=Gross Domestic Product =Normal distributed classical error term Strengths of using the econometric model: The model represents a multiple regression model whose advantages include the ability to identify and explore the relative impact of one or more of the predictor variables to the criterion value. In the research we could find that the total annual revenue earned by stores has a strong correlation with the with the revenue earned by the Amazon online shopping platform. Representation of online shopping platforms is also ignoring the contribution of other online shopping platforms other than Amazon. The may provide an implicit definition of the entire online shopping characteristics. Besides the sets of data used in the research were time series data observations.

According to Y. CAI and B. Such factors include economic conditions, employee performance, and government policies. This implies that maybe there are other important factors, which are likely to inhibit the performance of our regression model. Results implications and predictions. Despite the various progress made in online shopping platforms, there are some negative economic implications of this growth. One key impact is the decline in the number of shopping malls. Various studies have indicated that the surge in online shopping has reduced the number of shoppers in the shopping mall as an explanation for the reduced growth rates of shopping malls. Some authors have since claimed that the increased rates of shopping malls closing up are a direct influence of online shopping.

It is particularly true that the number of online shoppers has shown an exponential growth since its commencement. The total sales have since increased with some of the major online companies such as Amazon realizing total revenue of over 140 billion US dollars a year. However, this reduction in shopping mall growth cannot be particularly attributed to the growth in online shopping. Cai, Y. , & Cude, B.  J. Consumers’ Adoption of Online Shopping. Encyclopedia of Cyber Behavior, 466-476. Dávila, A. Shopping Malls and the Fight for Public Space. El Mall, 161-174. Internet/Broadband Fact Sheet. (2018, February 5). , & Guo, C. An Exploratory Study of Consumer Adoption of Online Shopping. Comparison-Shopping Services and Agent Designs, 6(2), 79-96. Markham, J.  E. Panigyrakis, G.  G. , & Theodoridis, P.  K.